ORDER NO. 86877 IN THE MATTER OF AN INVESTIGATION TO CONSIDER THE NATURE AND EXTENT OF REGULATION OVER THE OPERATIONS OF UBER TECHNOLOGIES, INC. AND OTHER SIMILAR COMPANIES BEFORE THE PUBLIC SERVICE COMMISSION OF MARYLAND CASE NO. 9325 Issue Date: February 26, 2015 On August 6, 2014, the Maryland Public Service Commission ( Commission ) issued Order No. 86528 affirming the Proposed Order of the Commission s Public Utility Law Judge Division and directed Uber Technologies, Inc. ( Uber ) to file an application for a motor carrier permit within 60 days in order for Uber to continue to offer either its UberBLACK or UberSUV services in Maryland. Order No. 86528 also directed the Technical Staff of the Commission ( Staff ) to draft regulations to more effectively regulate the provision of transportation services, including but not limited to the use of new technologies to manage and dispatch requests for transportation for hire, insurance, safety of vehicles and qualifications of drivers, and the method of providing notice of rates to the Commission and consumers, seeking input from the Parties and other interested persons. Uber filed a Motion for Stay and Request for Rehearing of Order No. 86528 on September 5, 2014. On November 25, 2014, Uber and Staff submitted a Joint Motion for 1
Approval of Agreement of Stipulation and Settlement ( Joint Motion ). 1 On December 1, 2014, the Commission issued a Notice of Request for Testimony/Comments and Evidentiary Hearing on the proposed settlement. On December 9, 2014, Staff filed the Direct Testimony of Christopher T. Koermer, which Uber adopted by letter filed that same day. The Maryland Office of People s Counsel ( OPC ), and Yellow Transportation ( Yellow ) filed comments on December 16, 2014. A hearing was held on the proposed settlement on December 19, 2014. At the hearing, Mr. Koermer appeared and testified in favor of the settlement on behalf of Staff. No witness appeared on behalf of Uber. Uber provided an Affidavit of Zuhairah Washington, General Manager of Uber DC ( Affidavit ). The Affidavit was not admitted as testimony but as a statement from Uber. I. POSITIONS OF THE PARTIES A. OPC In its Comments filed December 9, 2014, OPC states that [w]hile the framework of the proposed settlement appears to be a reasonable resolution of the core issues in this proceeding, OPC has identified several terms that are ambiguous or require further explanation to ensure that the settlement terms are unambiguous, enforceable, and in the public interest. In its Post-Hearing Brief, OPC states that the Commission must be assured that the structure and terms of the settlement are sufficient to ensure that the Staff s objectives are met. OPC maintains that this assurance includes verification of the 1 The Stipulation and Settlement Agreement begins on page 4 of the Joint Motion, attached hereto as Appendix A. 2
relationship between Uber and the entity Uber proposes be substituted for Uber, Drinnen LLC ( Drinnen ), Drinnen s agreement to carry out the settlement terms, and that appropriate consumer disclosures about Drinnen s role are provided. OPC s concern is that since Drinnen is not a party in this case, there is nothing in the settlement or the record to establish that Uber has the authority to bind Drinnen, or that Drinnen has agreed to perform under the settlement. OPC notes that Uber continues to operate without a motor carrier permit despite the Commission s August 6 order which was not stayed. OPC recommends that with regard to the Uber-Drinnen relationship and the consumer disclosures, the Commission not approve the settlement as proposed until Uber provides satisfactory clarifying responses on the record or as part of a modification of the settlement. With regard to the surge pricing component of the settlement, OPC notes that there are no criteria, parameters or limits on the surge pricing in the settlement. OPC concludes based on the testimony during the hearing that this settlement term is too ambiguous and too open-ended. OPC states that while Staff may have views or opinions as to the handling and resolution of surge pricing requests, these are not reflected in the settlement, which OPC believes could lead to further litigation if the surge pricing proposal were denied because it was determined to be unjust or unreasonable. OPC recommends that the proposed settlement be modified to require that any surge pricing proposal must meet specified criteria to be approved by the Commission, after notice and opportunity of parties to review and comment. Lastly, OPC recommends that the settlement be clear that Commission denial of a surge pricing proposal because it does 3
not satisfy the requirements of Title 4 does not affect the legal obligations of Uber and Drinnen under the settlement. B. Yellow In its Post-Settlement Hearing Brief, Yellow makes several arguments in opposition to the proposed settlement. Yellow contends that the two primary elements of the proposed settlement, the substitution of Drinnen for Uber and the approval of surge pricing, are not sufficiently supported with credible evidence in the record. Yellow points to several questions that Staff s witness was unable to answer, and contends that the Commission has no evidence to conclude that the proposed settlement, if accepted, will be binding on the intended entity. Yellow also states that the likelihood of customer confusion is manifest and requires justification in the record. Yellow maintains that the Affidavit cannot be considered reliable and competent evidence in the evaluation of this settlement, and that the Affidavit fails to fully answer many questions that have been raised. Yellow also argues that the proposed settlement compromises important public interests. Yellow urges the Commission to factor corporate behavior into its decision to accept or reject the settlement. Yellow notes that since UberX drivers will continue to operate without permits, Uber will continue to operate illegally, which Yellow maintains is a basis for rejecting the proposed settlement. Yellow questions the purpose of the language in Paragraph 6 of the settlement which contains regulatory language that may be included in the proposed revisions to the Code of Maryland Regulations ( COMAR ) 20.95. In particular Yellow objects to the 4
reintroduction of the term broker because Uber s position that it acts as a broker has already been rejected in this case. Yellow urges the Commission to fully evaluate pricing considerations. Yellow notes that the settlement appears to effectively pre-approve the rates that Uber has and will be charging in Maryland, including surge pricing, despite the fact that the Commission has not previously reviewed surge pricing methodology. Yellow poses the question in this case as one of whether the proposed settlement puts the public in a better position than Commission Order No. 86528. Yellow states that by accepting the settlement, the Commission gets questionable oversight authority over a basically unknown entity and to avoid Uber appeals having dubious viability. Uber, on the other hand, avoids having the Uber brand suffer the blemish of submission to Commission regulation and the pre-approval of its rate structure including surge pricing while only giving up litigation it is highly unlikely to win. Yellow concludes that the settlement makes no sense for Maryland and should be rejected in favor of the previously ordered compliance. C. Uber Uber asserts that the proposed settlement serves the public interest because it implements Commission Order No. 86528. Specifically, Uber contends that the settlement will ensure that the services provided by transportation providers who connect with passengers via Uber s digital platform comply with the Commission s common 5
carrier framework. Uber states that the settlement will provide regulatory certainty to the licensed drivers and permit-holding carriers who utilize the Uber app, as well as Maryland consumers who use the services provided. Uber argues that the settlement will bring this investigation to closure with the end of Uber s appeals. Uber notes that the settling parties in this instance are adverse to each other because they vigorously advocated their divergent positions over the course of an 18-month proceeding. Uber urges the Commission to not undo a carefully negotiated settlement. D. Staff Staff states that the settlement serves the public interest by offering new options to the riding public, and making for-hire transportation industry in Maryland more competitive. In Staff s view, the settlement would apply Maryland s existing regulatory requirements for passenger-for-hire transportation companies to the operations of UberBlack and UberSUV, and permit them to operate legally in Maryland, while adhering to the standards the Commission enforces to protect the safety of the riding public. II. STANDARD OF REVIEW The Commission has consistently stated that when considering a settlement, whether contested or otherwise, the Commission must determine that the settlement is in the public interest and that it is supported by substantial evidence. 2 We must review a proposed settlement to ensure that the outcome, and the resulting rates, are just and 2 In the Matter of the Proposed Merger of the Potomac Electric Power Company and Delmarva Power and Light Company, 93 Md.P.S.C. 134, 137 (2002). 6
reasonable. 3 As this is a contested settlement, we may also consider such factors as the desirability of avoiding costly and time-consuming litigation, and whether the settling parties represent interests that are normally adverse to one or more of the other settling parties. 4 III. DISCUSSION AND FINDINGS The parties to a proposed settlement have the burden of supporting the proposed settlement with substantial evidence. Staff provided substantial evidence with respect to the terms of the settlement in the form of written and oral testimony. Uber adopted Staff s written testimony but did not have a representative available to testify on its behalf (or on behalf of Drinnen, its wholly owned subsidiary it wishes to have substituted) at the hearings on the proposed settlement. Given the questions posed by other parties and the Commission that could not be answered sufficiently, we find that Uber did not provide substantial evidence with respect to a number of the terms of the settlement as proposed. However, resolution of the issues in this proceeding, namely compliance with regulatory requirements for transportation services and assurance of public safety through use of drivers with Commission-issued operating permits and fully insured Commissioninspected vehicles 5, are important objectives that are in the interest of the riding public. Thus, we find the proposed settlement, supported by substantial evidence submitted by 3 See Re Delmarva Power and Light Company, 102 Md.P.S.C. 236, 240 (2011). 4 Re Potomac Electric Power Company, 80 Md.P.S.C. 61, 64 (1989). 5 See COMAR 20.95.01.04 et seq. 7
Staff, is in the public interest. 6 IT IS THEREFORE, this 26th day of February, in the year Two Thousand Fifteen, by the Public Service Commission of Maryland, ORDERED: that the proposed settlement is hereby approved. /s/ W. Kevin Hughes /s/ Harold D. Williams /s/ Lawrence Brenner /s/ Kelly Speakes-Backman /s/ Anne E. Hoskins Commissioners 6 Paragraph 16 of the proposed settlement makes it clear that acceptance of the settlement shall not be deemed to constitute an agreement on our part to forego any power which we presently have. This would include the power to take enforcement actions against permit applicants/holders based on the operation of affiliates under our jurisdiction. 8
APPENDIX A